THE CHICAGO 'BAJVKE'R
Founded in 1898
Volume xxvii	CHICAGO, SEPTEMBER 1 1, 1909	Number n
Nebraska Banking Conditions Reviewed
as yet registered with the United States government to entitle them to write these bonds, therefore, the banks are forced to depend upon the eastern bond companies. None of these bond companies will listen to an application at less than $5 a thousand, simply advising that they do not wish the business if it is not at that rate. On the other hand, the state insurance board at Lincoln has fixed the rate that may be charged by a bond company at $2.50 per thousand with a penalty for any company that violates the law. No bond company under this situation will accept $5 per thousand for one of these Indian fund bonds even if the bank is willing to pay it. The result is that at this date, the banks offered a deposit from the government cannot get bonds to cover them. In view of this, I trust that you will agree with me that it is high time for our association to protect its members by the formation of a coni-pany within ourselves.
Guaranteeing Deposits
At our last meeting the idea of guaranty of deposits, which had for some time been agitated by the people, had taken tangible form in the incorporating into the platform of one of the political parties of this state, a plank advocating such guaranty by the state; the party advocating this measure was successful at the polls, and an act was passed by the legislature last winter to create a guaranty fund, yet being far from the idea expressed on the “hustings.” A suit to test the constitutionality of this act has been commenced, but up to this time the federal court has not passed upon the same, but the operation of the law has been held in abeyance pending the outcome of the suit.
Believing that this was a personal matter, we have studiously avoided any action being taken by this association in an official manner. Personally, I am opposed to the so-called guaranty, but considering that, as I believe it, the minority has rights that the majority is bound to respect, and cheerfully does respect, I have endeavored, with the help of our secretary and others, to keep the association free from litigation. I regretted very much to see this measure become a mere political one, knowing the extreme means resorted to by politicians to effect their desired end, I feared for the welfare of a business, which has become the bulwark of the entire commercial activity of the state and in fact, of the nation. I am one of those old fashioned bankers, who believe that the only way of providing against bank disaster is to adhere strictly to the lines of legitimate banking, which in the long run will not only result in better banking, but greater confidence. It is not possible to expect the people to put their absolute trust and their money into institutions which agitators are attempting to discredit. If the men, who make the laws under which the banks must do business, consider it necessary to magnify a danger which does not exist, what must the average individual infer who has no working knowledge of a bank, and only bases his faith upon the fact that the bank is allowed to do business under the protection of the state or government?
This destruction of confidence is unfair and unjust; while there is much in the banking law which can be improved upon, yet it is far better to leave the necessary adjustment• of these reform measures to men who have made banking a life study, than to have the average legislator, who. without any knowledge of banking business and from the desire to carry out pre-election pledges, proceed to attack the whole fabric of banking and
President C. E. Burnham, of Norfolk, in an eloquent address at the Omaha convention, tells of the year’s progress in his state — Takes up guaranty of deposits — The “Howey Plan” indorsed and explained
double the amount of the deposit was no longer necessary. '1 his did not change the standard rate for these bonds as that rate applied all over the country, but it did result in cutting the premium account of the banks in half, because a bond only half as large or thereabouts was needed. The gradual increase in rates, however, continued among the bond companies with the result that about a year ago a meeting was held in Philadelphia, attended by representatives of practically every bond company of any consequence in the country and rates on depository bonds were doubled. Rates on almost every other class of bonds were increased at the same time. Many bankers in this state, when informed that the rate was to be $5 per thousand per annum instead of of $2.50 as formerly, jumped to the conclusion that the bond companies were punishing the Nebraska bankers for the part they took in having the laws changed as above mentioned, but the fact that this $5 rate applied to every bank depository bond from New York City to San Francisco and from Canada to the Gulf disproves this conclusion. Another circumstance that points the same way is the protest that went up from Lincoln upon the raise in rates on the county and state officers, which was claimed by the state officials to be in the neighborhood of 300 per cent over the price charged two years before, also the protest from Washington where congress proposed to attach an amendment to a pending bill that would prevent the bond companies from making a concerted raise in rates on bonds for the government. All of this has nothing to do with the question of what is or is not an adequate rate on this class of risk. The eastern companies sustain losses on large risks like those at New York, Allegheny and elsewhere, then pronounce the business unprofitable and raise the rates on Nebraska banks along with the others in order to bring the revenue up to the point where it will cover these large losses. That is manifestly unfair to Nebraska banks and yet there can be no doubt that it is an insurance principle that a company must figure its average risk over the entire territory in which it does business and it would be a difficult proposition to induce an eastern company writing these bonds all over the United States to single out Nebraska or any other state and give it a better rate because it shows a clean sheet as to losses. This does not apply, however, to the two companies organized under the laws of this state and which only do business in Nebraska. They should rightfully figure the risk in this state alone without regard to the other states in the country and if done in this manner certainly $5 per thousand on bank depository bonds is far more than an “adequate” rate and judging from the past in this state, any company confining its business to Nebraska in this line will make money at the old rate of $2.50 per thousand. The complicated and unsatisfactory situation existing in this bond matter to-day is well shown by the predicament of those banks requiring depository bonds at this time, running to the ! United States government to• cover deposits of Indian moneys. The two local companies are not
I trust you will first allow me to express to you my pleasure at being honored to preside over this, the 13th annual convention of the Nebraska Bankers Association. When I examine the list of our ex-presidents and find the veteran financiers and able gentlemen who have served the association in the past, I am not at all surprised at the magnificent success of our organization, and I am proud of the distinction of being numbered with that body, but I am conscious all the time that my administration has been only a reflection of their wise guidance rather than my own personality. The policies adopted by my predecessors, and the efficient services rendered by our worthy secretary, have made it possible for even me to return to you the trust accorded me one year ago in as good a condition as then. Our secretary’s report will show a very satisfactory condition as to membership, and yet there are a few banks that have not been convinced of the advantages to be derived by being associated with us, and I desire to urge upon all members the necessity of securing these few banks, as the highest efficiency of the association cannot be attained until all banks are united in working together for the common good.
Group Meetings
The various group meetings of the state are strong factors in the maintenance of the interest in our state meetings, and the meetings held this past year have all been interesting and successful. Owing to illness and business, I was detained from attendance at these meetings, but from press reports and personal conversations held with those who were privileged to attend, I am convinced that these meetings are each year growing more beneficial to the banking interests of the state.
Burglar Insurance, Depository and Fidelity Bonds
This department, conducted by the secretary, has been very satisfactory during the past year, and I cannot but urge upon the association the necessity of making early arrangements to have this very important branch of our association made more efficient by the formation of a company within this association, so that the immense amount of revenue now paid to foreign corporations may be retained in our own state. The revival of the idea should have the attention of this meeting and I trust that the same will be pushed to a successful and satisfactory launching of an “Association Burglar & Fidelity Insurance Department.” Some dissatisfaction over the increase of rates by bond companies has been evident during the past year and in one or two instances, blame has been placed upon our secretary and the association for such increase in rates. This is all wrong and it might be well at this time to make an explanation of the cause of increase in rates. Some eight or nine years ago the depository bond business for banks had its start. The bond companies started in at a premium rate of about $1 per thousand, but as losses appeared they gradually came to a general opinion that the rate was not high enough and slowly increased it as years went by to $1.50, $2 and finally to $2.50 per thousand, which two years ago was the standard rate and was not cut by any of the companies in the business. In the case of two or three companies at that time the rate asked was above $2.50, but the latter rate was accepted as the standard. At this point the association succeeded in having our laws on the subject in this state changed so that a bond in